How did NAICS Codes come into existence?
The primary NAICS Code was developed and supported by the Federal statistical agencies for the use of the classification of business establishments for the collection, scrutinizing, and analysis of the data (in the statistical form), which is related to the economy of the U.S.
NAICS was created under the Office of Management and Budget (OMB) and later adopted in 1997 to replace the old method used in the name of Standard Industrial Classification (SIC) system. The NAICS Code was developed in support of Canada and Mexico's statistical agencies to set up a 3-country standard that enables them to have a high-level competition and comparison of the same.
The intention to promote the establishment's comparison was solely for the cause of healthy development of industries across the three nations. This was thought to elevate the scale of the economy and growth of the countries in a reputed manner. The primary NAICS covers the major fields of economics by structuring a code system. For many years it has been altered and revised to bring out the very best form of it and witness a change in the industry composition. In the last few years, some massive changes in the U.S., as well as the world economies, have brought the SIC under increasing criticism.
Some of the chronological events of the NAICS are:
▪ In the year 1991: The International Conference on the Classification of Economic Activities offered a forum for exploring the issues and for seeking new approaches to better the economic activities.
▪ In July 1992: The OMB had set up an Economic Classification Policy Committee, which was chaired by the Bureau of Economic Analysis, U.S. Department of Commerce, with members from the Bureau of the Census, U.S. Department of Commerce, and the Bureau of Labor Statistics, U.S. Department of Labor.
The OMB examined economic classifications for statistical purposes and checked the desirability of developing a new industry classification system for the United States on the basis of a single economic concept.
▪ On March 31, 1993: A Federal Register notice had announced OMB's decision to revise and alter the SIC for 1997. This establishment of the Economic Classification Policy Committee, and the process for revising the SIC.
▪ In the year 1987: The ECPC and Statistics Canada reviewed the existing structure of detailed "4-digit" industries and the 1980 Canadian SIC for conformance to economic concepts.
To conclude, we can say that the concept of NAICS Codes adds competency, economic growth, and statistical motivation to bring out better results in the business world of each country.